The Semi-Canard of Growing Income Disparity

Steven Pearlstein, a Washington Post business columnist, took a whack at the topic of income disparity, AKA the growing wealth gap, in today’s paper. Must admit, usually skip right over these pieces because of their predictable slant: Current economic policies are bad, the Administration is bad, corporations are bad, America — pretty bad — but the European social democracies, really, really good! Knowing Pearlstein’s fondness for the death tax (scroll down), well, that’s why they have recycling bins at the Metro.

But it’s really as balanced of a piece as you could hope for, at least given Perlstein’s predilections (and all his asides aside), drawing on a recent monograph by economist and former Democratic staffer Stephen Rose. Basic point: The demise of the American middle class has been greatly exagerrated.

This doesn’t mean the middle class isn’t shrinking. In fact, from 1979 to 2004, Rose calculates, the percentage of households in the “middle class” category — those with incomes of $30,000 to $90,000 — fell to 39 from 47 percent. But it would be hard to describe that as bad news when the proportion of well-off households — those with incomes of more than $90,000 — rose by nearly nine percentage points. During the same time frame, the percentage of households that were poor or near-poor remained about the same…[snip]

It is also a myth that the Great American Jobs Machine is producing mostly lousy, low-paying service jobs. Rose simplifies the government data by putting all jobs in three categories: “elite” jobs, encompassing managers and professionals; “good jobs,” such as those held by supervisors, skilled blue-collar workers, craft workers, police, firefighters and clerical workers; and “less skilled” jobs, such as those held by unskilled machine operators, laborers, sales clerks and waiters. Looking at it that way, it turns out that the number of lousy, low-skilled jobs has been on a long, steady decline since 1979, while the number of “elite” jobs has been growing steadily. The number of “good” jobs has declined marginally as skilled office work has replaced skilled factory work.

Which, we would argue, just reinforces the case for better education, training and basic seriousness of purpose. Knock off the bread and circuses and do your trigonometry.

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Rose adjusts the data for household size and excludes those headed by people younger than 29 or older than 59. And when he does, it turns out that the median income for the “typical American family” jumps to $63,000, which in most parts of the country buys a pretty comfortable middle-class lifestyle.

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Could he get more selective? Why on earth would a family of 4 with a 28 year old father be excluded? Or how about a 60 year old laid-off factory worker? Why not narrow it down to 35 year olds only? This study is selective and a complete crock.

Great post. In a similar vein we at Evolving Excellence just quoted a study that shows how pay for performance and merit-based pay has also contributes to the income gap. And as you pointed out, what appears bad on the surface (and to the narrow-minded pundits) is actually a positive with a counterintuitive “solution.”